New edition of ‘Understanding Reverse’ highlights $1 million HECMs

The latest edition of the reverse mortgage guide highlights product updates

Reverse mortgage product guidebook Understanding Reverse just published its ninth annual edition, which includes information on a series of product changes and updates that go into effect on January 1, 2023. This includes a new Home Equity Conversion Mortgage (HECM) limit of more than $1 million and other program and rate details.

So far, 2023 is shaping up to be a year of change for the industry, despite the fact that it hasn’t started yet. In addition to the historically high limit, the exit and consolidation of leading lenders has led product educator and author Dan Hultquist to believe that the need for reverse mortgage education is more acute than ever.

To gain perspective, RMD sat down with Hultquist for a conversation that will be featured in an upcoming episode of The RMD Podcast.

Ninth time’s the charm

The year 2022 marks the 10th anniversary for Hultquist’s work on the book that would become Understanding Reverse, with the first edition’s publication in 2014.

Since that time, many things have changed about the reverse mortgage product landscape, including the most prominent lenders, U.S. Department of Housing and Urban Development (HUD) and the Federal Housing Administration (FHA) regulations, the regulatory posture of the Consumer Financial Protection Bureau and more.

Reverse mortgage educator Dan Hultquist of Fairway Independent Mortgage Corporation.
Dan Hultquist

One notable change for 2023 is the rise of the HECM limit to $1,089,300, a historic high that could result in more loan proceeds from the FHA-sponsored reverse mortgage for owners of higher-value homes. While once limited to private-label options, the HECM is now potentially available as a reverse mortgage option.

“[The new limit] opens the door for us to work with borrowers who have much more valuable homes,” he said. “[In places like] California, New York, a little bit of Florida, and there are pockets of the country where if somebody has a very high-value home, they were looking at proprietary products.”

Many questions that Hultquist and other industry educators receive are regarding regulations. Loan officers and other industry participants have told Hultquist that the regulation updates are one reason they upgrade to a newly-revised version of the book.

“We get our regulations from so many different sources that it’s helpful to the lender, the loan originator, the underwriter, the closer and the servicer so that they know where the guidelines are written,” Hultquist said.

Hultquist generally doesn’t start writing the following year’s updates until very late in the year, as FHA and HUD will drop guidance and Mortgagee Letters regarding the new limits, along with the inclusion of new details in the FHA Annual Report to Congress.

“We have regulatory changes that often take place the first week in October because of HUD’s fiscal year,” Hultquist said. “And then we usually get a Mortgagee Letter that announces the new HECM limits for the next year [around that time]. So, I usually wait to finalize any changes until we have that ML drop, which is usually the first week in December.”

Industry change and a renewed need

Hultquist touched on the recent industry changes, noting that a byproduct of Reverse Mortgage Funding’s (RMF) exit from the business and the consolidation of Finance of America Reverse (FAR) and American Advisors Group (AAG) is that effective industry educators will lose their jobs. But in the challenging business environment, having good product educators active in the business is essential.

“I believe that educators and trainers in the reverse mortgage space are some of the most valuable employees in our space because most people don’t understand what [the product] is,” he said. “Even some regulators don’t quite understand it, so they buy the book, too. We rely on educators, so it’s always important for us to go ahead and get the new edition published so that everybody knows the new rules.”

The industry did not expect rates to swing as actively as they did in 2022, so the new edition also features a broader scope in its rates section, Hultquist said.

“On the forward side, they call them LTVs. But on the reverse side, we call them PLFs, or Principal Limit Factors because it takes into account the borrower’s age,” Hultquist said. “And so, we have a much broader spectrum of rates and ages this year into 2023, just because we don’t know what the market is going to do.”

A guide for forward professionals

Considering the relatively small size of the reverse mortgage industry, a longstanding debate revolves around whether to bring more forward mortgage professionals into the fold.

Because of the educational imperative for 2023, Hultquist believes recruiting of forward professionals is likely in the new year — and that they’re going to need accurate information resources.

“We have so many forward originators that are panicking at this point, wondering how [they can] diversify [their] product offerings,” Hultquist said. “We saw it actually begin in January.”

Hultquist works at Fairway Independent Mortgage Corporation as a national reverse training sales specialist and teaches prospective forward professionals about reverse in regular classes.

“We’re a large forward office here at Fairway, and so we found that our class sizes started to double or triple [at the beginning of the year],” Hultquist said. “We have so many forward, traditional mortgage loan originators that want to diversify their product offerings, and they need to have a resource. They need to have something they can rely on to find out answers to their questions.”

Having short chapters dedicated to answering reverse mortgage questions helps to broaden the appeal of the book, he said, and Hultquist expects forward professionals to have a desire for product offering diversification in 2023.

Listen to the full conversation with Hultquist in the upcoming episode of The RMD Podcast.

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